Free Press Journal

PNB shares take a massive hit, tanks 9% after Rs. 11,400 crore scam


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New Delhi: Shares of Punjab National Bank today extended its fall for the second straight session, falling as much as 9 per cent in morning trade after the lender said it has detected a USD 1.77 billion fraud. The stock opened at Rs 137, then hit a low of Rs 133.45, down 8.47 per cent over its previous closing price. On the NSE, the stock opened at Rs 137.60, then fell 8.57 per cent to Rs 133.35.  This is the second consecutive day of decline for the stock. It had slumped 10 per cent yesterday. The state-owned bank said it had detected a USD 1.77 billion (about Rs 11,400 crore) fraud in which billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking (LoUs) from one of its branches for overseas credit from other Indian lenders.

PNB has suspended 10 officers over the scam and referred the matter to CBI for investigation. While PNB did not name other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on LoUs issued by PNB.  An LoU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. Consequently, shares of Union Bank of India fell 1.85 per cent and Allahabad Bank shed 5.6 per cent.  Meanwhile, Axis Bank was trading on the green and touched an intraday high of Rs 554.30, up 1.90 per cent on reports that it has sold all the referred transactions with respect to PNB’s LoUs.

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This could be the biggest banking fraud in India as its quantum was bigger than an estimated Rs 9,000 crore scam at erstwhile Satyam Computers.